Difference between Private Equity and Merchant Banking?

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Sorry if this is a dumbass question, but I would appreciate an explanation. The only parts I could kinda grasp were that Merchant Banks issue shares of portfolio companies while PE firms typically don't. Is that even correct?

Comments (8)

 
Aug 7, 2020 - 6:58am

You may be surprised to hear that a lot of people consider merchant banking and private equity to be virtually the same thing. Merchant banking gets its name from investors putting up money and taking on risk to fund merchant ships. There may be some difference between specific PE firms and merchant banks but broadly speaking it's the same thing

 
  • Prospect in Other
Aug 7, 2020 - 9:56am

I can only speak for the firm I've been networking with but I'll bite and give some background. The bank I am referring to uses their balance sheet as their source of capital to deploy in corporate equity, Infra, RE Equity and Debt as well as special credit lending. That being said, the bank I am referring to may switch to a fund structure soon but the underlying business model is investing in "alternative" asset classes outside of the traditional public equities and and debt markets.

 
Aug 7, 2020 - 4:17pm

Merchant banks (BDT is the first one that comes to mind) are really hybrids between investment banks and private equity funds. Some also might have additional services too (BDT also has a HNW/PW advisory focus too, where they advise very wealthy families on various things).

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